The Zhitong Finance App learned that the independent research institute Penson Macroeconomics said that the further decline in consumer confidence supports the view that “US consumer spending will slow down in the second half of this year.”
The company said that despite improvements in households' views on the labor market, weakening retail sales and renewed weakness in confidence all point to a slowdown in consumption.
According to data released by the World Federation of Large Enterprises on Tuesday, the US consumer confidence index fell to 89.4 in August from 90.2 in July (revised down from the original value of 90.8), lower than the market consensus forecast of 90.1.
Penson analysts Samuel Thomas and Oliver Allen said that the expected index can guide consumer spending trends better than the overall index or current state of affairs index. The company said that the average reading for July and August — 71.1 — indicates a slowdown in consumer spending growth in the third quarter compared to the 2.2% annualized growth rate in the second quarter.
Analysts said that consumer spending in the first half of this year, especially in the second quarter, was supported by a number of one-time factors, the most notable of which was the massive wave of personal income tax rebates. The tax refund season ended in May, and currently higher gasoline prices are taking a toll on consumers.
Labor market data provided an even more positive sign. The proportion of households that said jobs were “hard to find” fell from 21.7% to 19.5% in August, while the proportion of households that said jobs were “adequate” rose from 24.4% to 27.0%. The resulting employment gap widened to 7.5 from 2.7 in July.
However, Penson cautioned that this improvement does not necessarily mean an inflection point in recruitment, as labor-market-related segments in the World Federation of Large Business Surveys are often drastically revised. The company said that even based on the surface value of the latest readings, the initial increase in private sector employment was only about 25,000 people per month. Considering possible revisions, the actual growth rate was close to zero.
The company currently expects the private sector to initially add about 66,000 new jobs, which is in line with the average for the previous three months. Penson also said that other recruitment metrics, including regional Federal Reserve Bank surveys and job posting metrics from Indeed and LinkUp, are still sluggish.
The property market provided another source of weakness. New home sales in July fell 10.5% from 678,000 units after the June upgrade to 607,000 units. Although Penson said these figures were highly volatile, the three-month average remained around 650,000 units.
Penson said that slow growth in the school-age population due to immigration cuts, a weak labor market, sluggish consumer confidence, and a rebound in mortgage interest rates may all continue to put pressure on new home sales. The company also noted high inventories — the three-month average inventory up to July was equivalent to 9.1 months of sales, slightly higher than the 6-month long-term average.
Penson said home builders may deal with excess inventory by cutting prices or providing incentives while cutting the start of new projects. Although single-family housing construction permits have stabilized, Penson's analysis points to another decline in the coming months.